Ilana Mercer, January 25, 2008

To revive flaccid financial markets, American politicians are now groping obscenely for their “stimulus packages.” It’s an ugly image. It’s also worse than useless. They might as well be gesturing lewdly like crotch-grabbing rappers, because that’s as likely as their economic package is to get the country out of economic straits.

The first stage on the road to recovery is to pinpoint the problem and take responsibility for it. You’ve spent more than you’ve produced and have switched to living on credit. Having exhausted your creditor’s good will, but not your insatiable appetites, you turn to counterfeiting cash in the basement—that’s where the U.S. finds itself today.

A debased dollar, price inflation, dwindling availability of seed capital, malinvestment and speculation (bubbles)—these are some of the consequences of the government’s promiscuous spending and inflationary practices.

The second stage in getting solvent is to quit spending and borrowing, live within your means, and start paying down what you owe. But not according to some very bad people. The late Henry Hazlitt, a brilliant libertarian philosopher and economist—which is why he’d be unemployed today—warned of bad economists who present their errors to the public better than the good economists. A gentleman, Hazlitt hesitated to call the “bad economists,” who offer up half-truths, wholesale liars.

So I will.

The aforementioned wholesale liars would agree on how to remedy personal indebtedness. When it comes to macroeconomics, however, the nation’s money mavens change their tune. Kudlow and Company crowed at the increase in easy credit brought about by Ben Bernanke’s cut in the Federal Funds rate. By sanctioning surpluses in the reserves that banks can lend out, Bernanke has signaled for the band to play on.

Passengers in the ship of fools steering toward bankruptcy can sally forth.

Problems brought on by government profligacy, the liars aim to correct by encouraging yet more spending and credit expansion. The “stimulus package” takes care of the spending element in this cretin’s cure-all. While tax cuts must always be welcomed—they are a return of stolen property—cutting cheques for those who’ve fallen on hard time should not. That’s tantamount to taking from some to give to others. By passing this obscene package, the government is seen to be doing something. That something, however, amounts to no more than moving money around: usually from the disfavored (taxpayers) to the favored constituency of the day (tax consumers).

Even if you believe government can “turn the economy around,” as do many pointy heads and their ditto heads, the fact remains that this government can’t because it’s broke; having unflinchingly fleeced the people over the years, it’s now insolvent. The proposed “tax rebates” to be dispensed by the misspeaker (Bush) and the speaker (Pelosi) will be hastily printed by the barnacle (Bernanke), or borrowed from Hu Jintao (the Chinese president). Tax kickbacks to the indebted will, moreover, only encourage what must be discouraged—spending—and discourage what must be encouraged—saving.

Sound money, not funny money, will make for a sustainable economic recovery. Ask the Chinese. As nosey American politicians keep reminding them, the Chinese have a democracy deficit. Unlike wastrel Americans, though, they don’t believe in debt, personal or national. China is growing at the annual rate of 17 percent. And according to Wing Thye Woo, professor of economics, the Chinese save up to 40 percent of their Gross Domestic Product.

The Chinese save as individuals in a truly free-market would—like there is no tomorrow. Or, more precisely, as individuals who know Uncle Hu has nothing to hand-out. (Neither does Uncle Sam, but Americans have yet to figure that out.)

That the Chineseplantheir economic lives has incensed Americancentral plannersSocial programs in China, apparently, fail the exacting standards of American socialism. Thus during President Hu Jintao’s visit to the US two years ago, the ubiquitous bunch of rugged individualists who hog the airwaves delivered a stern message to the amused leader.

The “poor” Chinese, they announced, save so energetically because they’re bereft of adequate social services. Bully Bush was forthwith instructed to bug Hu Jintao to ensnare his citizens in a safety net. He was to “level the playing field.” (Translated that means making our formidable rivals resemble us—sapped of vitality and prone to spending someone else’s salary.)

In Economics in One Lesson, that good guy, Henry Hazlitt, reminded us that “the rational saver, in making provision for his future, was not hurting, but helping, the whole community.” Money isn’t stored under the proverbial mattress, it is invested either directly (by buying securities) or indirectly (via the bank, which lends deposits out), thus creating steady, sustainable growth.

It should be news to no one that the degree to which its people discount the future in favor of immediate gratification can make or break a society. The Chinese economy is booming because the Chinese grasp that savings, capital accumulation, and investment are the lifeblood of a healthy economy.

It’s high time Americans, who never tire of cramming their values down gagging gullets, remember that solvency is a virtue; insolvency a vice.